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Q&A: Sam Balsara, Chairman and MD, Madison World

'Media owners spend too much on content'

Vanita Kohli-Khandekar  |  New Delhi 

Sam Balsara

For many years there was a sense of sameness about the guys running India’s ad agencies. There were (McCann), (Lintas), (HTA, now JWT) and there was (Madison) among a dozen others. In the mid-nineties as the foreign agencies started taking charge of their Indian operations, many of the old CEOs were eased out. Everyone assumed that Madison, a small agency Balsara had set up in 1988, would also be sold. What would this mild-mannered, Parsi gentleman do in a cut-throat new world where media buying, the cream of the business, was being hived off.

However, Balsara — chairman, managing director and majority owner of — surprised everyone. Madison did not just survive, it thrived. At Rs 2,500 crore in billings, it is today among the top few (billings refers to the total amount that Madison clients spent on media, not what Madison earned). Over the years, Balsara, who has remained independent, emerged as the plain-speaking grand old man of advertising and media buying.

Madison’s sharp reputation for media buying, however, overshadows the other businesses of the group. Balsara is now trying to rectify that. Earlier this year, he signed a 50:50 agreement with Trevor Beattie’s BMB, a UK-based creative agency. Last week came another one with OnMobile. More of these will happen as Balsara tries to fill the gaps in the bouquet of services he offers. Madison currently has 20 units across public relations, rural marketing, outdoor and entertainment among other services.

Vanita Kohli-Khandekar spoke to Balsara about the 360 degree approach and how the media industry can improve its profitability. Excerpts:

Given how rate-oriented media buying is and how low the profits are, do you think unbundling (of the media and creative business of agencies) was a bad idea to start with? Globally there is talk of having common balance sheets again. (Media agencies generally work on anywhere between 1 and 2 per cent of billings against the 15 per cent that the combined agency got earlier.)
Globally, unbundling was not an agency initiative but a client initiative. Clients drove unbundling because they wanted more efficiencies in their media buying.

Now get confused by the call for integration. What clients are asking is: “Without losing the benefits of bundling or specialisation, can you offer me a structure that helps my marketing guys to deal with multiple services (digital, outdoor, events and so on)?” That (being able to offer specialist solutions across all ways of reaching consumers, called a 360 degree approach) is easier said than done. Doing that requires collaborating with different specialists — in digital or direct marketing or design. Most accomplished professionals are accomplished because they are specialists, but they cannot collaborate (between different services). Generalists are better at that.

But the agency product is commoditised, there are no margins. Our profits are coming from scale, not out of a job well done. So there isn’t enough to invest in research or making the business sustainable (by getting, say, strategic planners to do the collaboration).

Why do metrics (ratings, readership or viewership figures) remain an issue across media, in TV, print, online. Why don’t we see buyers push for better currencies?
Good metrics is more important for the seller than it is for the buyer. There is no doubt that when there are good metrics the media grows. Print and TV are well-served on the metric front. Radio and outdoor are virtually not served. TV has grown because there is a decent metric (ratings). You could argue that it can be more robust. On the other hand, outdoor works, but spends can’t increase because there aren’t any metrics, we need to use instinct and judgement in buying outdoor.

Then there is the single metric (one metric that would help compare audience numbers or spends across TV, print, radio or other media). It may be CPM (cost per mille or thousand). But that is not robust because the data come from different sources. Therefore, you need single source data. But there is so much competition internally (within media), that media cannot get there (to single source data) unless large advertisers start putting in money to do it.

What are the other big issues, the roadblocks to growth?

Media owners spend too much on content. All the big ideas work better with big budgets. But advertisers pay for what they receive, not for what media owners put in. If you put Rs 100 crore in a show, you put a lot of pressure on yourself and on advertising. Ultimately, advertising has to deliver a higher ROI (return on investment) for a higher investment. If the ROI (return on investment) is not good, it (ad spend) will stay at Rs 1 or go to Rs 0.5. The reason TV saw a meteoric rise in the first 15 years was that advertisers were getting delighted with the returns. Now there are no returns. Kyunkii Saas Bhi Kabhi Bahu Thi (KSBKBT) brought 18 and 20 in ratings; today a top-notch show does 4.8.

But it does that on a larger base. Cable TV homes and, therefore, audiences have gone up by almost three times since KSBKBT (from 33 to 91 million homes)...
The increase in the number of homes is not commensurate with the decrease in ratings (viewership) because of fragmentation. To combat that (fragmentation) channels are investing more and more in programming. But if I have gold-lined walls in Madison, the client will not pay me more.

Because production costs are rising and ratings going down, inefficiencies are getting built in. The 18-20 rating on KSBKBT came at a cost of Rs 3 lakh per episode, the 4.8 today comes at a cost of Rs 9 lakh per episode. At 18-20 ratings, the channel was paying Rs 3 lakh for 6 million homes, now it is paying Rs 9 lakh to get 4.3 million homes. Plus there is now a distribution cost that was not there earlier.

And the entire cost is getting loaded onto the same GRPs (gross rating points, the total ratings on all the shows on a channel). If I buy the entire argument that this model can only be sustained on advertising, then what metric should the advertiser use?

You have been around the media, advertising space for 30 years. What are the big learnings?
One, say marketing and advertising are about ideas. I say it is more about your ability to sell the idea. I may have a great idea but that doesn’t mean Airtel or any other client will buy it. Any strong creative agency is not about great ideas but the ability to sell it to clients. This ability depends on your stature or that of the organisation you represent. Most businesses are not confident of what they are doing; therefore, they need the reassurance of a big name. I have seen as we became stronger in stature, it has become easier to sell our ideas.

The second learning is that every idea is not monetisable.

Third, “if it is safe, it is risky”. A lot of large clients are more risk-averse, though their ability to take risks is better. That comes in the way of meteoric growth. Inherently, if it is a safe idea, it won’t work.

First Published: Fri, December 17 2010. 00:04 IST